« The new Ice Age is coming. »
Naked truth #1: According to Deutsche Bank, about 15 trillion dollars in government bonds are being traded into the sub-zero territory all over the world. This represents about 25% of the entire market. We are definitely entering a new Ice Age.
Naked truth #2: If you think 1/4 of the entire bond market is still a small number, don’t be surprised if it reaches 50% while you’re sleeping. These sub-zero bonds more than tripled since October 2018.
While positive interest rates award patient human beings, who prefer to NOT spend today but sometime in the future, the sub-zero interest rates award the IMPATIENT ones. These fellows are paid to NOT think about their future.
The Central Bank’s ultimate goal is to stimulate banks/capitalists to lend more money instead of sitting on a pile of cash. Good for the economy and good for the stock market. Right?
No. It breeds unicorns.
According to Investopedia, a unicorn is a term that describes a privately held startup company with a value of over $1 billion. There are plenty of unicorns out there (334 total so far), mostly from the USA and China.
This upside-down type of incentive is stimulating investors—who crave positive returns—to put their money to work in any type of project, regardless of the overall quality or profitability. Companies with a ballooned valuation that can’t show a profit. Risk vs. Return? Meh, to hell with that. Too old school.
Central Banks are super creative, we gotta give ’em credit for that. They are always teaching us many ways on how to create bubbles. Icy bubbles for a new era. Be prepared.
Chart of the Day
Total negative debt in the world
One of the consequences of the chart above is the super-fast breeding of unicorns. Check the full list containing these legendary creatures here.
Video of the day
Bill Gates on unicorns | FT Business
In this 2016 video, Bill Gates told Stephen Foley he might short a basket of unicorns, but thinks VC is still a good long-term investment.
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